K-TIG Limited announced that it has entered into a Non-Binding Memorandum of Understanding with Darchem Engineering Limited regarding the intent to novate an Intermediate Level Waste, ILW, Nuclear Storage container contract that Darchem has to K-TIG to facilitate company technology development and optimise the design and manufacturing process for Intermediate Level Waste containers. Darchem is a market leader in the design, manufacture of a wide range of high integrity engineered products in stainless steel and titanium as well as thermal insulation systems for aerospace, motorsport, marine defence, nuclear and oil & gas applications. Darchem has extensive experience in the global nuclear industry with products in more than 180 nuclear sites worldwide and is a supplier of 3M3 ILW containers into the UK nuclear decommissioning program. Under the MOU, K-TIG and Darchem will work together to produce a binding agreement for the novation of an intermediate level waste contract where K-TIG will assume responsibility for the fabrication of these 3M3 ILW containers. Previously, K-TIG had entered into a research and development agreement with the Nuclear Advanced Manufacturing Research Centre with the purpose of optimising the design and manufacturing process for the suite of 3M3 ILW nuclear waste storage containers. A key part of this research is the development of sophisticated Quality Control and Quality Assurance technology. The QC/QA technology encompasses acoustic arc, ultrasonic and visual inspection technology to minimise welding defects, reduce rework, reduce the need for expensive X-Ray inspections, and ultimately reduce the total cost of welding quality. Successful novation of a contract from Darchem to K-TIG will provide K-TIG with direct access to a 3M3 intermediate level waste containers contract and, subject to the establishment of fabrication capability, the production scale to compile the necessary Artificial Intelligence database to support the development of its QC/QA technology. The MOU with Darchem is another significant step for K-TIG towards executing its nuclear waste storage strategy and extending its commercial presence in the UK and the EU. Material terms of the MOU Under the terms of the MOU, which are non-binding save for exclusivity: K-TIG will pay a royalty-per-container to Darchem for containers supplied under the contract. Darchem will voluntarily exit 3M3 ILW contract and will not accept any prolonged risk exposure due to novation. Upon novation, all contractual risks will immediately transfer to K-TIG. The novation of any contract is contingent on end-customer approval and satisfaction with procurement guidelines. Darchem and K-TIG will now work with the end customer to seek their approval for novation incorporating any requirements and conditions precedent that they may have. Both parties agree to negotiate a formal binding agreement to novate the contract as soon practicable with the relevant parties. Darchem agrees to exclusively deal with K-TIG in relation to certain 3M3 ILW contract for a period of one year from the date of execution of the MOU. Significance of the Memorandum of Understanding: Darchem has extensive experience in the global nuclear industry and is a supplier of 3M3 ILW containers into the UK nuclear decommissioning program. Successful novation from Darchem to K-TIG will provide K-TIG with direct access to a 3M3 intermediate level waste containers supply contract and, subject to the establishment of fabrication capability, the production scale to compile the necessary Artificial Intelligence database to support the development of its QC/QA technology. The Company is unable to quantify the value of the contract to K-TIG at this point in time as the value of individual contracts or supply agreements under contract is not presently known by the Company. The Company's current expectation is that the contract will provide the opportunity to supply several hundred containers over a period of five or more years. The final number of containers to be provided is intended to form part of the binding agreement for novation with Darchem. The Company will update the market in accordance with its obligations under ASX Listing
Rule 3.1.